Management Turnover as Change Agent

Monday, February 8, 2016

Liberum Research's latest January 2016 executive turnover numbers show a decline from the rapid growth in turnover seen in December and November 2015. Nevertheless as a general, January's turnover figures tend to be slower than those registered in the previous months of December and November. January's turnover numbers when compared to the figures registered in January a year earlier, showed increases in three out of the four key categories Liberum analyzes for its monthly report (see details below). The overall numbers for January were surprisingly positive when one considers how the stock market has been reacting over the last number of weeks along with growing concerns by numerous analysts and business experts that the American economy could be moving toward recession in the near future. Liberum contends that continuing strong executive turnover over the last number of months combined with strong employment growth and moderate unemployment continue to point in a positive direction for the American Economy.

Typically, Liberum's monthly executive turnover figures tend to follow a similar pattern with the U.S. Government's Bureau of Labor Statistics' (BLS) Monthly Employment Report and ADP's Monthly Private Employment Report. The BLS and ADP's latest January Reports were more sober than the numbers for December but overall, they continue to point to strong job growth and consistent rates of moderate unemployment, currently at an 8 year low of 4.9%.

Private sector employment increased by 205,000 jobs from December to January according to the January ADP National Employment Report®

"One of the main reasons for lower overall employment gains in January was the drop off in jobs added at the largest companies compared to December. These businesses are more sensitive to current economic conditions than small and mid-sized companies,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Over the past year, businesses with less than 500 employees have created nearly 80 percent of new jobs.”

Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year."

The employment news from the U.S. Government's Bureau of Labor Statistics (BLS) released Friday, February 5, appeared more negative but a close reading between the lines indicates the latest figures were reasonably positive. According to the January BLS Employment Report:

Total nonfarm payroll employment rose by 151,000 in January, and the unemployment rate was little changed at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in several industries, led by retail trade, food services and drinking places, health care, and manufacturing. Employment declined in private educational services, transportation and warehousing, and mining.

Both the number of unemployed persons, at 7.8 million, and the unemployment rate, at 4.9 percent, changed little in January. Over the past 12 months, the number of

unemployed persons and the unemployment rate were down by 1.1 million and 0.8 percentage point, respectively.

A closer reading of the latest numbers BLS numbers and the circumstances behind them actually point to real progress in the employment numbers. According to a story by Akin Oyedele in Business Insider right after the BLS announcement:

"Economists had estimated job gains of 190,000 and an unemployment rate of 5%.

There was also a nice surprise from the manufacturing sector, which added 29,000 jobs last month, the most since August 2013. The sector has been hurt by weak global demand and the strong dollar in recent months.

Also, the labor-force participation rate rose to 62.7% from 62.6%.

Overall, and despite the month-on-month slowdown, it's a strong report that shows the labor market is still robust."

Taken together, the report was "somewhat hawkish for the Fed, given the move down in the unemployment rate and the move up in wages," Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said. Feroli believes the Fed still wouldn't raise rates if it were meeting tomorrow.

"The report unequivocally supports the Federal Reserve’s (and our) baseline view that further gradual rate hikes are warranted," Harm Bandholz, chief U.S. economist at Unicredit Bank AG in New York, wrote in a note to clients. "A falling unemployment rate and faster wage gains also mean that the Fed is getting closer to meet both of its mandates."

Liberum, despite the growing concerns about a recession in the future and troubles facing the world economy, remains optimistic about the American Economy for the next number of months. Executive turnover in public companies continues to remain robust and is predicted to continue. The likelihood of robust executive turnover and ongoing job growth should counteract some of the negative news about recent weak corporate profits and the continuing stock market turmoil in the United States and throughout world stock exchanges.

Liberum Comparison Breakdown of Key January Executive Turnover Figure

Below is a breakdown of Liberum's key executive category percentage changes for January 2016 compared with January a year earlier and the previous month of December 2015.

January 2015 Compared to January 2016

For January 2016 increases in turnover occurred in three out of four key categories. CEO changes increased 18% from January a year earlier, CFO changes declined -2%, C-level changes increased 15%, and board of director changes increased 5%, respectively.

December 2015 Compared to January 2016

The month to month changes in executive turnover was a reverse, three out of four categories saw declines. CEO changes declined a mere -1%, CFO changes declined -6%, C-level changes declined -22%, while board of director changes increased 16%.

Below are the overall turnover totals for January 2016. The information is just illustrative of how institutional investors could view executive turnover and its possible relationship with a company's performance. Using Liberum's database could offer a totally new perspective on investment and is a potential way to come up with unique special situation opportunities. Executive search firms can use the information to generate new leads and new clients, and consulting firms can use the data for a variety of analytical purposes.

Call now (212-988-5497) or email richard@twst.com and get a no obligation one week trial to Liberum's online management change database. Find out why Hedge Funds, Executive Search, Business Intelligence, and Consulting firms all rely on Liberum's data.

According to Liberum's Management Change Database, a total of 226 CEO related changes occurred during January 2016. Here are 45 changes from the time period that caught my eye. By significant, I'm looking for situations where I think a particularly strong or weak choice has been made - given the apparent current state of the company - or where there is an interesting special situation. (Anyone using Liberum's database could do the same kind of analysis for other key titles, e.g., CFOs, COOs, CMOs, CIOs, Presidents, etc.)

Investors need to diligently monitor key management changes. Certain management changes should be viewed as a "special situation" that can have a direct and major impact on a company's performance and share price.

New CEOs know more than the market about the company. Their decision to take the position contains information. Likewise the departing CEO.

Likewise departing CFOs New CFOs will bring new skills and often-times a new direction. This is normally significant, and worth analyzing.

Liberum Research, the independent research firm focused on corporate management change, has developed an online relational database designed to assist institutional investors develop special situation investment ideas related to executive management change. While special situation investing traditionally revolves around corporate restructuring, spin-offs, and acquisitions, executive management changes, depending on the circumstances, can represent a short or long-term investment opportunity.

Thursday, January 14, 2016

The last year experienced significant upside in the American economy. Employment growth continued to show steady gains throughout the entire year. Unemployment also continued to drop throughout the year and was below estimates put forth by virtually all major analysts. Manufacturing saw gains overall but has not been as positive a force in the economy as has overall employment growth which took place in nearly all sectors of the economy. These positive trends have also continued in executive turnover for public companies as tracked by Liberum Research's Management Change Database. Over the most recent number of weeks, stock markets throughout the world have been reeling and concern has been growing for the world economy and particularly the Chinese economy. Even the United States, which has faired economically quite well in the last year to two years, has appeared to show signs of concern about the economy and the possibility of recession. While problems remain, Liberum's latest positive monthly, quarterly, and annual executive turnover numbers continue to point to a strong American economy despite the economic difficulties the Chinese and other industrialized nations are encountering. While the American economy is likely to encounter problems in 2016 as well, Liberum continues to remain optimistic about the economy's overall performance. The continuing high level of executive turnover in key categories and the continuing positive trend of employment growth throughout the economy serve as a major buffer to future economic difficulties.

Liberum has put together below, an eight year quarterly and annual breakdown of executive turnover totals for CEOs, CFOs and C-level executives covering North America. Most of the below quarterly numbers showed continuing declines until the second quarter of 2011. At that point, the numbers began to reverse themselves. Turnover at the executive levels of corporate America began to grow while not consistently and that trend has continued and is expected to follow a similar pattern for 2016.

Anyone investing in the market must pay special attention to executive turnover both at the top and the middle executive ranks. Failure to do so, will result in lost opportunities or worse. To take advantage of executive changes, get a free trial to Liberum's Online Management Change Database. Just call Richard at 212-988-5497 or send an email to richard@twst.com requesting your free trial. Within a day of your trial, you will have access to over 250,000 data points from which you can generate ideas and daily information on who is changing jobs at the top and where they are going.

Below is a simple table outlining the quarterly and annual turnover totals as registered through Liberum Research's Management Change Database for 2008 through 2015 for CEOs, CFOs and overall C-level turnover.

Total CEO Turnover Comparisons

Year

2008

2009

2010

2011

2012

2013

2014

2015

1st Quarter

745

491

388

346

680

583

500

522

2nd Quarter

596

380

321

581

665

619

527

538

3rd Quarter

533

409

298

713

636

627

557

621

4th Quarter

461

430

328

697

673

636

651

674

Annual Total

2,335

1,710

1,335

2,337

2,654

2,465

2,235

2,355

Total CFO Turnover Comparisons

Year

2008

2009

2010

2011

2012

2013

2014

2015

1st Quarter

593

332

296

280

640

495

468

513

2nd Quarter

551

326

273

404

612

557

595

588

3rd Quarter

438

279

256

629

598

582

550

628

4th Quarter

364

313

258

476

569

562

586

624

Annual Total

1,946

1,250

1,083

1,789

2,419

2,196

2,199

2,353

Total C-level Turnover Comparisons

Year

2008

2009

2010

2011

2012

2013

2014

2015

1st Quarter

6735

4061

3453

2863

5442

3971

4083

3923

2nd Quarter

7430

5051

3199

4041

5036

4102

4117

4767

3rd Quarter

4865

3690

2522

5349

4235

4123

3950

5368

4th Quarter

4277

3439

2381

4596

4197

4196

4200

5297

Annual Total

23,307

16,241

11,555

16,849

18,910

16,392

16,350

19,355

Latest Monthly Comparisons

The latest monthly comparison figures with regard to executive turnover for December 2015 as compared with those of December 2014 and December 2015 and November 2015 are as follows:

CEO turnover for December 2015 showed a mere 1% change from that of December 2014, CFO turnover increased only 3%, C-level turnover increased 24% and Board of Director turnover increased 21%.

The the month to month change from November 2015 to December 2015 overall was somewhat less clear. CEO turnover declined 8% for CEOs, declined 15% for CFOs, but remained unchanged with regard to C-level changes and increased 13% for Board of Director changes.

December CEO Changes of Possible Significance

In the below report, Liberum has focused on 46 CEO changes of special significance for the month of December out of a total of 229. We have also put together the overall turnover figures for the month of December 2015. The below information is just illustrative of how investors could view executive turnover and its possible relationship with a company's performance. The same could be done for COOs, Presidents, Chairmans, etc., just through Liberum's Management Change Database.

Investors need to diligently monitor key management changes. Certain management changes should be viewed as a "special situation" that can have a direct and major impact on a company's performance and share price.

New CEOs know more than the market about the company. Their decision to take the position contains information. Likewise the departing CEO. Likewise departing CFOs.

New CEOs will bring new skills and often-times a new direction. This is normally significant, and worth analyzing.

Liberum Research, the independent research firm focused on corporate management change, has developed an online relational database designed to assist institutional investors develop special situation investment ideas related to executive management change. While special situation investing traditionally revolves around corporate restructuring, spin-offs and acquisitions, executive management changes, depending on the circumstances, can represent a short or long-term investment opportunity.

Liberum's over ten year old database offers institutional investors the ability to examine an individual company, sector/s, group of companies, and/or geographic region/s/ locations via a metric of one's own choosing. You can use the information individually or in combination with a number of other financial tools to develop unique investment ideas.

CEO Change makes a difference

Liberum believes that senior management change is one of the most important areas for investors to follow.

Who is Liberum

Liberum Research is a research firm focused on C-level and Director management change in public companies. Liberum launched its Management Change Database in January 2005 and provides alerts and feeds to hedge funds and professional service companies. There are typically 2,000 or more changes per month. Liberum is a division of The Wall Street Transcript. Liberum's Website